Crypto news

Two independent analysts simultaneously record a fundamental shift in the global financial architecture. The excess liquidity indicator in markets has turned negative for the first time since 2021, and the 40-year bull cycle in the bond market appears to be over. These signals carry direct risks for Bitcoin and all risk assets.

Monitoring of excess liquidity, calculated as the difference between the growth rate of the money supply, inflation, and economic growth, has turned negative for the first time since 2021. This means that "free" money, which traditionally fuels the stock market, is no longer available. Historically, when this indicator goes negative, capital begins to flow from stocks into long-term bonds, and the yield curve flattens. This pattern has invariably preceded a weakening of stock returns over a 3-6 month horizon. It is important to understand: the current tightening is not an initiative of the new Fed leadership—the market itself has been pricing in this scenario throughout the year, and the regulator is merely "catching up" with reality.

Against this backdrop, the overheating of valuations looks particularly alarming. Stocks are currently expensive relative to bonds in a way that has only occurred in 5% of cases over the past half-century. The paradox is that retail investors continue to actively buy stocks: inflows into exchange-traded funds for U.S. stocks posted the second-largest weekly result in history. In other words, retail is entering the market precisely at the moment when the traditional source of support for valuations—excess liquidity—is disappearing.

The 40-year bull market in bonds is over

Another analyst suggests looking at the situation more broadly. While the crowd's attention is fixed on AI and cryptocurrencies, the key event is unfolding in the bond market—an asset that underpins virtually every "conservative" portfolio. In 1981, bond yields reached 14%, and by 2020 they had fallen to zero. This was 39 years of continuous rate decline, which ended at the moment of pandemic panic, when the system "flooded" itself with liquidity. It was then that the 40-year bull market in bonds quietly ended—at a moment when everyone felt saved.

This reversal is not the end of the game, but the beginning of a much more complex period. Forty years of falling rates lifted all assets together, and passive ownership of "the entire market" beat active selection. Now that the trend has reversed, valuation, balance sheet quality, and real cash flow come to the forefront. According to JPMorgan calculations, at current valuations, the return of the S&P 500 index over a ten-year horizon could trend toward zero. This makes the market a rich field for the active investor, but extremely dangerous for the passive one.

For Bitcoin, both signals primarily carry short-term risk. As a liquidity-sensitive risk asset, BTC risks coming under pressure alongside overvalued stocks. However, in the logic of a long-term reversal, there is also a flip side: if the "buy the index and hold" model stops working, and traditional bonds lose their safe-haven status, some capital may over time seek alternatives outside traditional markets. In such a scenario, Bitcoin could compete for a role as one of the assets of a new era—though this will not happen immediately and is far from guaranteed.

My view: We are entering an environment where liquidity will no longer be cheap and abundant. For Bitcoin, this means that previous growth drivers—the inflow of "easy" money—are drying up. In the short term, pressure on BTC will persist, but it is precisely under such conditions that truly strong long-term positions are formed. The key question is not whether Bitcoin will fall, but whether it can establish itself as a safe-haven asset in the new financial reality.